Lenders often rely on customers adopting a “set and forget” mentality when it comes to their home loan and interest rate. This means that in the medium and long term it’s likely a mortgage holder may have an outdated and therefore more expensive product that’s working not for themselves, but for the bank. Could this be you?

Borrowers are leaving behind potential interest rate savings and the ability to be debt free sooner when they neglect to revisit their rate and product and how it compares to the market. It can therefore be argued that a mortgage holder’s apathy equates to being charged a “loyalty tax.”

How to avoid paying a loyalty tax?

• Request a lower rate: A rate review with your mortgage broker is essential, ideally on an annual basis. Your broker will be able to act as you advocate, knowing the best strategy to obtain the optimum outcome with your lender. When they come back with their best discount, you can then compare this with how it stacks up with the rest of the mortgage market.
• Refinance elsewhere: It may be that your existing lender’s best offer does not excite you or you simply are ready to avail yourself of lower rates and incentives elsewhere, refinancing can be a sure-fire way of saving significantly on your home loan. With all the incredible incentives available that exist to entice new business, refinancing can quite literally be money in your pocket.
• Switch to a cheaper product: If refinancing to a new lender is not an option due to other factors at play, changing home loan products within your existing lender is a great option not to mention, very easy. Your mortgage broker can run through what is available and even if splitting your products may prove beneficial.

How do you determine if you are paying a loyalty tax?

If you answer “no” to any of these questions, then it’s a good chance you are paying a loyalty tax:

• Do you know what your current rate is?
• Do you know what a competitive rate looks like in today’s market?
• Have you reviewed your rate in the past year?
• Have you changed lenders in the last five years?
• Do you like paying more than necessary on your home loan?

Don’t make the all-too-common mistake of adopting a “set and forget” mindset when it comes to your lending. The mortgage market is volatile and your bank will certainly not diarise to catch up with you regularly to see if they can offer you more discount. But we will.

Make sure you check in with your mortgage broker to make sure if you are due a “mortgage loyalty tax” return this year!